Does Wall Street Deserve Your Money in 2016?

December 11, 2015

Connect Member

Founder, Paladin Research & Registry. Author, “Who’s Watching Your Money”

It’s the end of another year, when millions of people will review the 2015 results that were produced by their financial advisors. Three questions are paramount when they review current advisors: 

  1. Should they keep the same advisors for 2016?
  2. Should they find new advisors for the New Year?
  3. And most importantly, how do they know new advisors will produce better results than current advisors?

Judging the results of advisors is never easy. They control the data that consumers review and they use relationship skills to mask bad results, excess risk, and high expenses. The number one tactic for advisors, who are in trouble, is to buy time to continue generating revenue from client assets for as long as possible.

2015 Results
The number 1 criterion for most consumers is the performance of their assets.

Year-to-date, the S&P 500 is up 1.5 percent and there is a good chance investment expenses will be more than 1.5 percent.

This means, net returns after the deduction of all expenses, may be negative for the year. Best case, a lot of consumers will experience a flat year with returns that are at or near zero.

How does this match-up with the expectations that were created by their financial advisors? Advisors create high expectations because it helps them sell investment products and services. The biggest scam in the world is high returns for low risk.

Bull Market Geniuses
The U.S. has had a prolonged Bull Market since 2008. Consequently, a lot of advisors appear to be investment experts because the securities markets are going up. That’s because a lot of consumers give them credit for the performance of the securities markets.

This can be a big mistake depending on the expectations that were created by advisors.

People can achieve the performance of the securities markets by investing in low cost Index Funds and Exchange Traded Funds. The funds are designed to match the results of popular market indices.

On the other hand, a lot of people were sold “beat the market” investments to justify higher expenses. These consumers should only give their advisors credit for 2015 performance that exceeded the market’s rate of return — after all expenses have been deducted.

Roll the Dice
Consumers have a choice if they decide to replace their financial advisors. They can use the same processes they used to select their current advisors or they can use a different process that may produce a better, long-term result.

One option is to use a service that helps them find and research top quality advisors. Paladin is the only SEC registered firm that vets, rates, and validates the quality of financial advisors and firms.

This free Paladin service gathers data from advisors, vets their data, generates quality ratings, and produces research reports so people have a record of advisor credentials, ethics, business practices, and services. Consumers have the facts they need to make informed decisions.

This free online service has helped more than 2,000,000 consumers make the right decisions when they selected financial advisors and firms. They picked competent, ethical professionals and avoided advisors who create high expectations to sell expensive, under-performing investment products and services.

Jack Waymire is a member of the DailyWorth Connect program. Read more about the program here.